Regulators have told Bank of America Corp. that the company needs to take steps to address a roughly $35 billion capital shortfall based on results of the government's stress tests, according to people familiar with the situation.
The exact amount of the needed infusion couldn't be determined late Tuesday, and Bank of America officials either declined to comment or couldn't be reached.
Regulators began notifying the 19 financial companies subjected to the government tests of the results Tuesday.
...
At Bank of America, the government's findings are likely to set off a scramble over how to fill the capital hole at the nation's largest bank in assets.
The Charlotte, N.C., bank already has received $45 billion in capital from the federal government, some of it to help the bank cover losses stemming from its purchase of securities firm Merrill Lynch & Co. in January.
The amount of capital now needed by Bank of America could exceed what the bank can raise by selling assets or more shares to the public.
As a result, the bank may have no choice but to convert the government's preferred shares into common stock.

This isn't too terribly surprising. I think one of the biggest takeaways from the stress test results will be that BofA is in a lot worse shape than any other major U.S. bank, Citi included.

8
comments:

Anonymous
said...

This can't be true. Ken Lewis told us that BAC didn't need to raise any new capital. If he wasn't telling the truth, surely the shareholders would have voted him out. ;-)

The reason Citi doesn't have to raise as much as BofA is because the government is already giving Citi credit for converted all that preferred stock to common (~$45 billion). The real results were that Citi needed at least $55 billion....and BofA needs "only" 35 billion.

"The reason Citi doesn't have to raise as much as BofA is because the government is already giving Citi credit for converted all that preferred stock to common (~$45 billion). The real results were that Citi needed at least $55 billion....and BofA needs "only" 35 billion."

Is that actually the case? I've heard conflicting reports about that, and it's hard to keep track of all the leaks.

I'm just basing my prediction on numbers I've seen in various broker notes and analysts' reports. The consensus seems to be that BofA has about $80bn of residual exposure to CDOs, real estate-related securities (residential and commercial), and the monolines, which is about double Citi's exposure. BofA is drowning in CMBS, and I know the loss estimates Treasury used for commercial real estate in the stress tests were very high (12% I think?). That, and various chatter about BofA and the other banks, is why I think BofA will come out looking worse than any other major U.S. bank. I could be completely wrong though. Wouldn't be the first time.

This can't be true. Ken Lewis told us that BAC didn't need to raise any new capital. If he wasn't telling the truth, surely the shareholders would have voted him out. ;-)

The sooner Ken Lewis is ousted the better, as far as I'm concerned. It's amazing that the board still expresses confidence in him even after Countrywide and Merrill. What does he have to do to get fired? Buy AIG? Or Fannie Mae perhaps?

we were holdingDiablo 3 Items planning to call anyone that ended up being really floated for your Court docket a fool. These folks have zero value intended for all judges since public servants, and probably less Runescape Goldregard for the legislations which they offer.

Great and useful site! It's worthful in my lifetime~ Also, I think we should learn more in the future, so I choose this site to study!cheap phones Not only are there many friends, but also there are many resoures~

About Me

I'm a finance lawyer in New York. I used to focus on derivatives and structured finance (you know, back when there was a structured finance market). I spent the majority of my career at one of the major investment banks. My background is in economics and, unfortunately, politics.

Subscribe - RSS

Subscribe via email

Disclaimer

This site is intended for educational purposes only. The content on this site DOES NOT constitute, nor should it be construed as, specific legal advice. The opinions expressed on this site are the author's personal views, and may not represent the opinions of the author's employer(s), past or present. Your use of this site does not form the basis for an attorney-client relationship. Sending the author an email does not create an attorney-client relationship.

You should seek professional legal counsel authorized to practice law in your jurisdiction before acting on any information contained on this site. I expressly disclaim any and all liability of any kind or nature with respect to any act or omission based wholly or in part in reliance on anything contained on this site.